Moving from a traditional hierarchical organisation to a decentralised one requires fundamental changes throughout your organisation. It’s not about adapting but changing: from how you organise and share information, to how you view and approach power dynamics and human relationships. Without those fundamental shifts from everyone with current authority, you won’t benefit from the true advantages of decentralisation.
Many successful decentralised organisations started out as decentralised from the start but it’s possible to successfully make the shift at any time if you’re committed to making fundamental changes in your organisation. Here’s some guidance on what decentralisation is, why being decentralised could be a benefit to your organisation, and some tips to getting started and to meet the challenges you might find along the way.
What is a Decentralised Organisation?
Decentralised organisations distribute decision-making power and work across the organisation. By distributing decision-making, all parties affected have a say in the organisation’s governance and how work is managed.
A centralised organisation relies on one individual or leadership team to make key decisions. It has a clear chain of command moving from the top down through the various levels in the hierarchical organisational structure. Meanwhile, a decentralised organisation follows a hierarchy of purpose, not people. It relies on collaboration and shared decision-making across the organisation.
Decentralisation requires an explicit decision to change power structures by those currently in power. It's incredibly challenging to change from the inside if those in power aren't personally committed to it. If decentralisation isn’t fully embodied by those in power, it can often cause more harm than good to the organisation and its members because the reality of decision-making and power distribution won't match the supposed decision-making protocols and power distribution.
People want fulfilment in their work and are looking for roles where they can bring more of their skills and passions, take initiatives, and make an impact. Many centralised organisations don’t offer this to the extent that people would like, making it difficult for them to retain talent.
Secondly, hierarchies were built for a world where we believed we could predict and control our environment. And that’s simply not the case. Our environment constantly changes, requiring organisations to shift to a Sense & Respond approach. To do this well, you need to enable everyone in the organisation to quickly act on signals they see without getting held back by centralised bureaucracy. Decentralised organisations provide prime conditions for more effective responsiveness as those closest to the situation can immediately respond—instead of sending it up the chain.
Because of both of these, decentralised organisations are more resilient. Decentralisation is also primed to improve innovation by creating containers for emergence, experimentation, and learning, much more than in a centralised organisation.
Simply put: Decentralised organisations are best positioned for long-term survival in today’s volatile business environments.
Tips for Starting the Shift
Shifting from a traditional centralised structure to a decentralised one is challenging. Before starting, everyone with authority needs to be fully aligned and committed to the transformation. This is often easier said than done, as decentralisation requires leaders to abdicate their positions of power. Without committing to replacing traditional hierarchies with role-based ones, your organisation won’t fully benefit from decentralisation.
Here are a few suggestions to get started:
- Identify your organisational purpose and make this the north star for the organisation.
- Adopt a governance process to update your organisational agreements and policies that all members can impact. For example, Holacracy, Sociocracy, or other Teal methodologies.
- Map your current operational reality into circles (teams) and roles. Encourage people to fill multiple roles in different parts of the organisation, erasing the hierarchy of people.
- Set up a monthly meeting to review and update your governance structure, circles, roles, and policies, as well as a weekly meeting for operational work within each circle.
- Create a free flow of transparent communication across the entire organisation.
The Common Challenges
As with any governance structure, decentralised organisations do have their challenges. It’s important to be aware of and know how to overcome them.
Here are a few possible challenges that may come up while moving towards a decentralised structure:
- Without the right tools and processes in place, communication and collaboration can be difficult. At Nestr, we provide tooling that helps decentralised organisations collaborate and align around a common purpose.
- Decisions can sometimes be made that don’t consider the overall organisational direction or needs. This is why an aligned organisational purpose is so imperative to decentralisation.
- There will be a start-up cost as your entire organisation adapts to this paradigm shift. This will, for a while, likely slow down your productivity.
- People must lead their work rather than simply executing delegated work. This is exciting but requires training, learning, and getting comfortable with this working style.
- Finding the right people requires a map of roles and accountabilities, so you know who is accountable for what rather than just looking upwards in the hierarchy. Nestr helps you do this!
- People might get stuck in consensus-seeking, where they try to agree on everything they do before moving forwards with a decision. Because there's no boss to turn to, you must calibrate on a shared purpose and strategy instead.
- Old hierarchies and norms might creep in. For example, it can be intimidating when a previous director of a certain role disagrees with a decision.
Making the Transition
Decentralised organisations are still a relatively young concept, with each one encountering its own set of challenges. In reality, it’s easy for hierarchies to emerge in different ways within a decentralised organisation and it’s essential to create regular spaces to have conversations about this.
It’s also crucial to involve all relevant members across the organisation in making decisions through consent and to ensure that all decisions contribute to the overall organisational purpose.
At Nestr, we support organisations making this transition by aligning members with a common purpose and offering the tools needed to self-organise around their work.